DEI is D.O.A.: What President Trump’s Executive Order Means for All Employers
Still grappling with the fallout from the Supreme Court’s decision in Students for Fair Admissions, which ended affirmative action in higher education, employers now face liability for their diversity, equity and inclusion (DEI) programs. In light of President Trump’s January 21, 2025 Executive Order (EO) entitled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” (EO 14173), this threat reaches across industries and affects all employers—not just federal contractors and institutions of higher education.
The new EO revokes a decades-old executive order (EO 11246) that established federal contractor affirmative action obligations for women and minorities and required written affirmative action plans to be updated annually. It also signals the Trump administration intends to penalize both federal contractors and private companies for promoting, enacting, or employing DEI programs.
What are DEI programs?
The EO does not define what a DEI program is, nor does it specify what type of DEI or diversity efforts the Trump administration believes to be unlawful. During his first administration, President Trump banned federal DEI programs that teach “divisive concepts.”
While the scope and meaning of “illegal DEI” in the new EO remains unclear, the order suggests the Trump administration views any diversity efforts specifically aimed at advancing women, minorities, or members of the LGBTQ+ community to be unlawful discrimination. However, federal contractors must still conduct affirmative action plans as they relate to veterans and individuals with disabilities by statute.
Implications for Federal Contractors
The Trump administration intends to enforce its “illegal DEI” ban via the False Claims Act, a federal whistleblower statute. All future federal contracts and grants will:
- require contractors or recipients to agree that the organization’s compliance with all federal anti-discrimination laws is material to the government’s payment decisions under the False Claims Act
- require the contracting organization to certify it “does not operate any programs promoting DEI that violate any applicable federal anti-discrimination laws.”
Because there is a great deal of uncertainty regarding which DEI programs run afoul of anti-discrimination laws, federal contractors that maintain DEI programs face increased liability under the False Claims Act. Organizations found in violation of the act may be required to pay triple damages as well as other civil penalties.
The impact on current federal contractors whose existing contracts do not contain a “no DEI” provision is unclear. But it’s worth noting the Trump administration has proactively taken steps to ferret out attempts to disguise connections between contracts and DEI or similar ideologies.
Implications for Private Employers
The Trump administration’s intention to end “illegal DEI” practices extends beyond federal contractors to all private sector employers. The new EO directs the Attorney General to compile a report within 120 days recommending actions to enforce “Federal civil-rights laws” and “encourage the private sector to end illegal discrimination and preferences, including DEI.”
The Attorney General is also directed to identify the “most egregious and discriminatory DEI practitioners” and specifically identify up to nine potential targets of civil compliance investigations of “publicly traded corporations, large non-profit corporations or associations, foundations with assets of 500 million dollars or more, state and local bar and medical associations, and institutions of higher education with endowments of over 1 billion dollars.”
As a result, private companies such as Walmart, Target, McDonald’s, Ford, John Deere, and Amazon are scrubbing DEI programs (and any programs that could be construed as DEI) from their organizations.
States are also jumping on the anti-DEI bandwagon. Nineteen state Attorneys General, including Virginia’s Jason Miyares, signed a letter calling on big box giant Costco to end “unlawful discrimination” tied to its DEI policies. Texas Attorney General Ken Paxton put financial institutions JPMorgan, Bank of America, Morgan Stanley, BlackRock, Citigroup, and Goldman Sachs on notice that DEI commitments that “prioritize politics over consumers and investors” could result in enforcement actions if they are found to violate state or federal law.
The Trump administration’s stated intention to aggressively enforce its new initiatives via litigation, investigations, and regulatory action gives rise to significant risk of time-consuming, burdensome enforcement actions for all U.S. employers who continue to embrace DEI programs.
What’s Next for Employers?
The lawfulness of these directives and enforcement actions remains to be seen, given that robust federal anti-discrimination statutes remain intact. However, it appears whether a given investigation or enforcement action is ultimately lawful or even substantiated is likely not as important to the administration as initiating enforcement. Successful or not, all enforcement actions exact significant tolls on institutions’ finances, profits, morale, and productivity.
While some organizations are scrubbing their DEI programs and policies, others will certainly take the position that diversity efforts, which are already required to comply with existing law, are by definition not “illegal” and may be maintained.
Companies that value diversity, equity and inclusion and incorporate such principles into their workplace the right way are going to have a more defensible position to any attacks on their programs.
Litigation may delay and/or clarify the new administration’s goals, but it is not particularly likely to halt progress on them altogether. Further clarification and agency action are expected, and for that reason, federal contractors, grant recipients, and other affected entities should consult counsel as necessary.
The Woods Rogers Labor & Employment and Government & Special Investigations teams are here to help you navigate these issues and continue to monitor DEI-related mandates. If you have questions about the recent executive order, or would like us to evaluate your DEI programs for risk, please contact the authors of this alert, your Woods Rogers attorney, or any member of the Labor & Employment and Government & Special Investigations team.
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